Tata Companies Form the Top and Tail of CSR 10 India Index 2012

CSR 10 India Index tracks the performance of top 10 Indian private sector companies by revenue in terms of their CSR (Corporate Social Responsibility) spend. The criticality of the index iseven more now with the upcoming Corporate Affairs Law that mandates CSR spend equivalent to 2% of net-profit. The CSR 10 India Index tracks the current performance of these wealth creators in terms of being responsible social citizens. The index has been created to reflect the overall sentiment of CSR investment and may be broadened in coming years for providing even better representation. In future editions it would also delve into quality of CSR aspects to work out a composite index value. The index tracks current year profit-after-tax than a three year average that the new law takes as base. In that sense Index takes a different approach from exact guidelines of the proposed law. However, the thinking is to help companies be CSR ready in coming years and plan CSR like core business.

Methodology

CSR 10 India Index has a fairly simple methodology. It bases its calculation on two basic factors- profit after tax and current CSR spends. The index first compares current CSR spends to the mandated amounts and calculates variance in percentage terms. This part of the index is called Variance Scoreand consequently there is a Variance Rank. The second part of the index tracks how much a company is contributing to the overall deficit or surplus in CSR spend for these 10 companies.This is known as the Contribution Scoreand hence there is a Contribution Rank. The latter is done with the belief that the larger the net-profit of the company larger is the responsibility for not missing the CSR spend target. The overall CSR 10 India Index Score is the average of Variance Score and Contribution Score. The smaller the score higher is the rank in CSR 10 India Index. As a last part CSR 10 India Index ranks are compared with Fortune India 500 ranks for 2012to showcase difference in commitment towards generating profit vis-à-vis contributing to CSR.

Summary of Findings CSR India Index 2012

The top 10 private sector companies put together made a total of INR 734 billion in profit-after-tax for thefinancial year 2011-12.

For 2011-12 the top 10 companies spent less than half of what is mandated in the proposed law i.e. instead of INR 14.67 billion the overall spend was only INR 6.9 billion. As a combine the top 10 companies returned a poor Variance Score of minus 53.

In the top 10, Tata Steel is the only one that has a CSR spend of more than 2% of its profit-after-tax. All others have to still ramp-up their act.

It is also interesting to see a Tata Motors languishing at the bottom. Along with TCS it may have to spend close to INR 4 billion additionally on CSR in coming years.

Larsen and Toubro seem to be quite close to the mark in terms of percentage and even the amount of increase it needs to make in the coming years is not very high.

Reliance Industries has a relatively high spend as a percentage of profit-after tax, however in coming years it may need to increase its CSR spending by around INR 1 billion.

ICICI Bank, the largest banks in India, also languishes at the bottom.

Utility of the CSR 10 India Index

The index will be highly useful for the companies in seeing their relative performance on CSR spends. It would also be useful to both companies and NGOs in exploring partnership synergies. It can be understood by non-India audience by using an exchange rate of 1 USD= INR 50. The Index will also provide the general sentiment of the industry towards CSR spending. For example the current sentiment is highly negative score of 53.

Authors
Anup Tiwari is the Chair, South Asian Fundraising Group and has worked for almost two decades in forming symbiotic partnerships between companies and the not-for-profit sector. He is one of the authors of the book “Global Fundraising- How the World is Changing Rules of Philanthropy” published by Wiley USA and frequently writes and speaks on not-for-profit sector. Shweta Shukla is a banker turned not-for-profit leader who brings her background in Economics and Finance to developing partnerships between the non-profit and for-profit sectors. She also writes on www.fundraisingindia.org

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